I Hit Apple's $7.47 June Quarter EPS, Here's What I Expect For The September Quarter

I projected Apple's (NASDAQ:AAPL) June quarter's EPS would be $7.47 on revenue of $36 billion, up an estimated 2.8%. The company's actual EPS was $7.47 with revenue of $35.3 billion, up 0.9%. I was too low on my gross margin and iPhone unit estimates and too high on my iPad and Mac projections, which offset each other. This is a link to a Fortune article with my estimates and Apple's results.

Apple's guidance results in EPS between $7.23 and $8.09 for the September quarter

For the September quarter, Apple gave revenue guidance on its June quarter results conference call of $34 to $37 billion with gross margin between 36% and 37%. When you take into account the company's operating expense, other income and tax rate guidance, along with an estimated share count of 909 million, the EPS range is between $7.23 and $8.09.

Apple updated guidance when it announced on September 23 that it sold over nine million iPhone 5cs and 5s's in their first three days via an SEC 8-K filing. It said 'Apple expects total company revenue for the fourth fiscal quarter to be near the high end of the previously provided range of $34 billion to $37 billion, and expects gross margin to be near the high end of the previously provided range of 36% to 37%.'

September quarter revenue and EPS estimates

I am estimating revenue of $37.5 billion, up 4.3% year over year, which is above the high-end guidance of $37 billion. Not surprisingly, iPhones should be over 50% of revenue and 65% to 70% of profits.

Gross margins should be helped by iPhones being about 56% of total revenue since they have the highest gross margins of Apple's main product lines offset by the higher material costs of the new iPhones. I am projecting gross margin to come in at 36.8%, which is down 10 basis points from the June quarter, and at the high-end of the 36% to 37% guidance.

My EPS estimate is $8.13, down 6% year over year, which is slightly above the high-end of projected guidance of $8.09. My estimate is based on operating expenses being a little higher than guidance along with matching guidance of $200 million in other income and a tax rate of 26.5%. My share count assumption is 909.3 million, which would be down 15 million shares from the June quarter.

June quarter

September quarter

Guidance

Actual

Guidance

Estimates

Revenue ($ bil.)

$33.5-$35.5

$35.3

$34-$37

$37.5

Gross Margin

36.0%-37.0%

36.9%

36.0%-37.0%

36.8%

EPS

$6.66-$7.43

$7.47

$7.23-$8.09

$8.13

iPhone units (mil.)

31.2

36.3

iPad units (mil.)

14.6

11.5

Mac units (mil.)

3.75

4.4

Source: Company reports and C. Jones estimates

iPhone estimate of 36.3 million units

I am projecting 36.3 million iPhones, which would be an increase of 35% year over year. This is based on growing September 2012 quarter's iPhone sales of 26.9 million by 20% (June quarter's iPhone growth rate) and adding the 4 million unit delta between the iPhone 5c & 5s launch of over 9 million and the iPhone 5's launch of over 5 million. Verizon also announced that it had activated 3.9 million iPhones in the September quarter and I have an analysis based on Verizon's activations that supports 36 million or more iPhones being sold.

The iPhone's Average Selling Price (ASP) is projected to decline slightly from the June quarter's $581 to $575. Revenue would be $20.9 billion or 56% of total revenue and increase 22% year over year.

Some of the biggest swing factors to estimating iPhone sales this quarter include the impact from the 5c and 5s being available in China at the September 20 launch, new carriers such as NTT DoCoMo carrying them and channel fill, especially of the new iPhone 5c.

iPad estimate of 11.5 million units

I am projecting 11.5 million iPads, which would be a decline of 2.5 million units from a year ago and 3.1 million from the June quarter. ASPs could decrease slightly from $436 in the June quarter to $425 in September. Revenue of $4.98 billion would be 13% of total revenue and decline 35% from a year ago.

While competitors are nipping at the heels of the iPad it doesn't appear that they are having the same kind of success as they are in the smartphone market. The October 22 refresh of the company's iPad line-up will help the December quarter's holiday sales and may be the products needed to get the iPad on a good growth trajectory.

Mac estimate of 4.4 million units

The past two years Mac sales have increased by 24% and 22% from the previous quarter. I am estimating that they will increase at a lower rate of 17% sequentially since the June 2013 quarter's Mac sales declined 5% quarter over quarter vs. increasing 5% in 2011 and being flat in 2012. ASPs should hold relatively steady at $1,300 from $1,303 in June. Mac revenue would be $5.7 billion or 15% of total revenue. The back to school sales season may not be as strong as before due to iPads being available.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Sand Hill Insights and Chuck Jones is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Sand Hill Insights does not purport to tell or suggest which investment securities readers should buy or sell. Readers should conduct their own research and due diligence and obtain professional advice before making an investment decision. Sand Hill Insights will not be liable for any loss or damage caused by information obtained in our materials. Readers are solely responsible for their own investment decisions.

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